Examining the decline of low-end patents

A patent defines a piece of intellectual property. As with a parcel of land, the patent’s owner can legally prevent any trespass (called an infringement) on the patent. Accordingly, analogous to the size of a parcel of land, the size of a patent (usually referred to as its scope) is critical in determining its value. The term low-end generally connotes a low-cost product with corresponding low quality. In the context of patents, however, where even slight mistakes, omissions or carelessness can mean the difference between a patent worth millions and a worthless piece of paper, low-end patents, prepared and prosecuted in haste with little attention to detail often have no value at all. Moreover, recent changes in the technical, legal and competitive landscape have drained most of the limited value they had.

A large percentage of patents fall into the low-end category and, surprisingly, many are owned by some of the world’s largest companies. Often, large companies think only of the current annual budget and how to keep patent costs as low as possible. To them, patents are a commodity, like pens and paper, to be purchased at the cheapest price. The only control over the patenting process is rigid adherence to cost metrics. Seldom is there advanced thinking about the actual value of the patents obtained or what constitutes value. Not surprisingly, many companies obtaining low-end patents earn little money enforcing or licensing them.

Thus, the driving forces behind low-end patents are costs, disregard (or a lack of understanding) of patent value, and also an outdated view of how to use patents. Years ago, a large stack of low-end patents was enough to scare off competitors (particularly small businesses) or force them to take a license. Even if each patent was worthless, the time and expense to wade through the entire stack was cost prohibitive. But, the advent of advanced computer technology, which makes it fast and easy to analyze a large number of patents, recent changes implemented as part of the America Invents Act (AIA), more determined litigation defendants which, in this economy, can no longer afford the cost of an unwarranted license, and potential DOJ or FTC actions against companies unfairly using their patents have drained much of the value from low-end patents. Should certain pending legislation (particularly the loser pays system for patent infringement cases) be implemented, low-end patents may be worth little more than kindling.

What makes a patent valuable?

The name of the game is the claim. A patent ends with numbered sentences called claims, and it is the claims that are or are not infringed. The rest of the patent, usually called the specification, basically acts as a dictionary to define the claims and satisfy other legal requirements.

Generally speaking, low-end patents are prepared with narrow claims and sketchy, paper-thin specifications, usually focusing on a single example of the invention. This leaves large swaths of potentially valuable intellectual property unprotected and free for competitors to copy, and even to potentially patent themselves. It is a one-two punch that decimates the potential value of even the most creative inventions. Not only is a low-end patent often worthless from the standpoint of stopping infringers, it adds insult to injury because the patent document publicly discloses your invention, thereby providing a road map to design around its narrow claims. The diagram below illustrates the problem:

After filing the low-end patent application, prosecution in the USPTO is done on a shoe-string budget, usually by further narrowing the claims and adding off-the-shelf, rote arguments, immediately capitulating to many of the USPTO’s positions, rather than arguing for broad claim scope. This surrenders more of the limited scope with which the application started. True, it is cheaper to prepare and prosecute a patent application in this manner since little (if any) time is spent thinking about or arguing for broad scope or how competitors might circumvent the resulting patent. Costs alone are paramount, but most of the invention’s value is left behind.

The AIA further pulls out the rug on low-end patents by providing relatively low-cost methods to challenge their validity, such as post-grant review, inter partes review and certified business method challenges.

Conclusion

Low-end patents will never die because there is always a market for cheap. But, they are of little value now, the AIA has further lowered their value and, if proposed legislation (particularly the loser pays system for patent infringement cases) is enacted, their value will drop even more. The bright side is that stockpiles of low-end patents can no longer be used freely against legitimate business, particularly startups, to drain their resources and stifle competition.